Section 10 of the Lanham Act has what’s called an “anti-trafficking” provision, which prohibits the assignment of intent-to-use applications “except for an assignment to a successor to the business of the applicant, or portion thereof, to which the mark pertains, if that business is ongoing and existing.” The provision was added by the Trademark Law Revision Act of 1988 when the United States began allowing intent-to-use applications. With this new type of application, there was a concern that the applications would become a commodity, so the law imposed limitations on their transfer.

But what exactly does it mean? Courts have had three different interpretations:

First, it might mean that the mark must actually be used before it can be assigned. This is the position taken in Ab Coaster Holdings, Inc. v. Greene, Nos. 2:10-CV-38, 2:10-CV-234 (S.D. Ohio Sept. 25, 2012) (“Bodytime Wellness, however, did not have ‘an ongoing and existing business’ related to the Ab Coaster mark in December 2006 at the time of the assignment because the mark was not in use”).

Or it might mean that the application is validly assigned even if the mark is an extension of the applicant’s existing business, only in a planning phase, when the business was transferred – for example, the transfer of an application for non-metallic pipe couplings and joints, fence posts, and ski poles when the assignor was only in the ski pole business, as was the case in Exel Oyj v. D’Ascoli, Opp. No. 91160397 (TTAB Sept. 19, 2008).

Or it might mean that the business transferred has to be the same kind described in the application, although the particular mark itself isn’t in use. This was the position, in dicta, in Railrunner N.A., Inc. v. New Mexico Dep’t of Transp., Opp. No. 91172851 (T.T.A.B. July 17, 2008).

Creative Arts by Calloway, LLC v. Christopher Brooks gives us some more help in interpreting Section 10. Christopher Brooks is Cab Calloway’s grandson and performs as The Cab Calloway Orchestra. Creative Arts by Calloway is a business started by Cab Calloway’s widow, Zulme Calloway, and other family members. Zulme Calloway filed an intent-to-use application to register the mark CAB CALLOWAY for retail store services and entertainment services. She then transferred the application to Creative Arts by Calloway before filing a Statement of Use or Amendment to Allege Use.

Brooks opposed the registration of the mark and successfully proved before the Trademark Trial and Appeal Board that he was the senior user of the mark CAB CALLOWAY. Creative Arts appealed to the Federal District Court of the Southern District of New York and Brooks raised the validity of the transfer in the trial court proceeding. The court ordered the parties to brief the matter for summary judgment.

Creative Arts objected to the court’s framing of the question, characterizing it as a determination of whether there was goodwill attached to the mark CAB CALLOWAY, which there cannot be for a mark not yet in use. But the court clarified that it was not use of the mark per se that mattered, but rather whether there was a business to which the mark could pertain:

Plaintiff seems to conceptualize goodwill as a concept independent of both a trademark and an “ongoing and existing” business, rather than synonymous with the part of an “ongoing and existing” business that a trademark symbolizes.

….

As goodwill is inseparable from an “ongoing and existing” business utilizing the trademark in question, the critical inquiry regarding the validity of Mrs. Calloway’s assignment of the ITU application to Plaintiff is – as I stated in my December 9, 2011 order – whether “Zulme Calloway’s ‘business activities’ were organized as an ongoing and existing business to which the ‘Cab Calloway’ mark pertained.”

It then reviewed Mrs. Calloway’s business activities and decided they weren’t enough — collecting royalties and approving use of her husband’s name in return for payment did not rise to the level of a business, particularly given testimony in an earlier suit between the parties that Mrs. Calloway took no steps to “market, merchandise, advertise, promote [or] sell the products bearing Cab Calloway’s name, likeness, voice or caricature.” And reciting that the goodwill is transferred in the assignment agreement does not make it so.

Unfortunately, though, because there was no business, the court didn’t have to investigate the relationship between the proposed mark in the intent-to-use application and the transferred business, so we’re still left wondering what the correct interpretation of Section 10 is.

2 Responses to What Is an “Ongoing and Existing” Business?

Anonymous

January 2, 2013 at 5:13 pm

The phrasing on the last sentence is a bit ambiguous, and needs clarification. I also find the use of the word “Unfortunately” in that last sentence to be vague (for whom?) and, well, unfortunate itself. It was certainly not unfortunate for the Defendant!

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Ms. Chestek is admitted to practice in Connecticut, the District of Columbia, Massachusetts, New York and North Carolina and is Board Certified by the North Carolina State Bar's Board of Legal Specialization in Trademark Law.

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